If you are like most Americans, you have at least one credit card. Most have multiple credit cards and a significant amount of debt.
During a recession, credit can be beneficial, but it can also get out of control quickly. Understanding how to handle credit card debt can prepare you financially for financial hurdles.
Reducing your credit utilization ratio
Your credit utilization ratio counts towards a significant percentage of your credit score. A high credit utilization ratio also results in higher monthly payments. The fewer bills you have, the more financially stable you become. During a recession, it helps to lower credit card bills to help save for unexpected expenses. To reduce your credit utilization ratio, pay off the smallest credit card balance first and then focus more money toward monthly payments on the next smallest credit card balance.
Budgeting and monitoring your credit
Monitor your credit and your credit report regularly to ensure accuracy. Budget a portion of your monthly income towards your credit card bills to guarantee that you have enough money to cover them. Late payments can harm your credit score, so keep track of each payment and due date throughout the month.
Budgeting and other methods to reduce your credit card debt sometimes do not work. You may have substantial debt or find yourself in a tough time where you cannot afford to spend extra money on your credit card bills. Fortunately, there is help for people who want a fresh start from their credit card debt. Bankruptcy and debt settlement are two tools to get yourself back on track.